I think the entire process is nuts. My husband and I both attended state schools between us we have a Ph.D. and a MD, we are doing what we love and are both quite happy. I think it depends a lot on the field. For instance, if DD wanted to go to law school I would encourage her to try to get in a top school for grad because, given the employment rate of lawyers, it matters. I received a full ride in both my undergrad and Ph.D programs at a state school and am doing exactly what I want to without being bogged down by a ton of debt. I will encourage DD to attend in state public schools and really distinguish herself at those places. I think the entire system is nuts and I work in it. That is just me though;)!
